Dynamic Pricing of Substitutable Products in the Presence of Capacity Flexibility

Firms that offer multiple products are often susceptible to periods of inventory mismatches where one product may face shortages while the other has excess inventories. In this paper, we study a joint implementation of price- and capacity-based substitution mechanisms to alleviate the level of such inventory disparities. We consider a firm producing substitutable products via a capacity portfolio consisting of both product-dedicated and flexible resources and characterize the structure of the optimal production and pricing decisions. We then explore how changes in various problem parameters affect the optimal policy structure. We show that the availability of a flexible resource helps maintain stable price differences across products over time even though the price of each product may fluctuate over time. This result has favorable ramifications from a marketing standpoint because it suggests that even when a firm applies a dynamic pricing strategy, it may still establish consistent price positioning among multiple products if it can employ a flexible replenishment resource. We provide numerical examples for the price stabilization effect and discuss extensions of our results to a more general multiple product setting

Is Dynamic Pricing Viable for Small Market Collegiate Athletics?

Sport organizations use dynamic ticket pricing (DTP) strategies to generate extra revenues. DTP is based on demand and occasions. This exploratory study reported the results of the online survey data collected from 48 mid-west college/university athletic directors and marketing managers. The participants shared responses regarding their perceptions of the use of DTP by regional and private smallmarket collegiate athletic programs. Specifically, the study examined the perceived benefits and shortcomings of DTP. Past experiences implementing the strategy are also discussed. The results concluded that the majority of respondents were receptive to DTP although they questioned whether the strategy could deliver excessive financial benefits. They also noted that the practice of frequent ticket price change may be cumbersome and challenged

Econometric Analysis of Pricing and Operational Strategies

This dissertation contains three essays. The first essay, entitled Pricing and Production Flexibility: An Empirical Analysis of the U.S. Automotive Industry, uses a detailed dataset of the U.S. auto industry to examine the relationship between production flexibility and responsive pricing. Our analysis shows that deploying production flexibility is associated with a reduction in observed discounts and with an increase in plant utilization. Our results allow quantifying some of the benefits of production flexibility. The second essay, entitled An Empirical Analysis of Reputation in Online Service Marketplaces, uses a detailed dataset from a leading online intermediary for software development services to empirically examine the role of reputation on choices and prices in service marketplaces. We find that buyers trade off reputation and price and are willing to accept higher bids posted by more reputable bidders. Sellers primarily use a superior reputation to increase their probability of being selected, as opposed to increasing their prices. Our analysis shows that the numerical reputation score has a smaller effect in situations where there exists a previous relationship between buyer and seller, when the seller has certified his or her skills, when the seller is local, or in situations that prompt higher interpersonal trust. The third essay, entitled The Effects of Product Line Breadth: Evidence from the Automotive Industry, studies the effects of product line breadth on market shares and costs, using data from the U.S. automotive industry. Our results show a positive association between product line breadth and market share and production costs. Beyond the effects on production costs, we study the effect of product line breadth on mismatch costs, which arise from demand uncertainty, and we find that product line breadth has a substantial impact on average discounts and inventories. Our results also show that platform strategies can reduce production costs and that a broader product line can provide a hedge against changes in demand conditions

Optimal Policy for Production Systems with Two Flexible Resources and TwoProducts

Manufacturing companies are facing increasing volatility in demand. As a result, there has been an emerging need for a flexible multi-period manufacturing system that uses multiple resources to produce multiple products with stochastic demands. To manage such multi-product, multi-resource systems, manufacturers need to make two decisions simultaneously: setting a production quantity for each product and allocating the limited resources dynamically among the products. Unfortunately, although the flexibility design and investment have been extensively studied, the literature has been muted on how to make production and allocation decisions optimally from an operational perspective. This article attempts to fill this literature gap by investigating a multi-period system using multiple flexible resources to produce two products. We identify the structural property of the cost functions, namely ρ-differential monotone. Based on this property, the optimal production and allocation policy can be characterized by switching curves, which divide the state space into eight or nine sub-regions based on the segmentation of decision rules. We analyze different cases in terms of production costs and resource utilization ratios, and show how they affect the optimal production and allocation decisions. Finally, we compare three heuristic policies to the optimal one to display the advantage of resource flexibility and the effectiveness of a heuristic policy. Supplementary materials are available for this article. Go to the publisher’s online edition of IISE Transaction, datasets, additional tables, detailed proofs, etc

The effect of technological innovation on employment: the case of manufacturing sector in South Africa

The role of technological innovation in the growth of an economy and the production of goods and services motivated this research. Technology is expected to boost production and relieve workers of the stress of doing repetitive tasks. It can also have a long-term impact on economic activity by increasing manufacturing efficiency and lowering production costs, which can be translated into lower prices for the goods and services demanded. The main objective of the study is to examine the relationship between technological innovation and employment, using a case study of the manufacturing sector in South Africa, making use of the Tobit regression model estimation technique. Annual secondary time series data spanning the period of 1970 to 2019 was employed. Earlier studies conducted in South Africa measured the relationship between employment in the manufacturing sector and technological innovation using different methodologies, including estimating procedures, model specifications and time frames. In this study the Tobit model estimation technique is utilised. The Tobit model results showed that there is a negative and significant relationship between variables used as proxies for technological innovation and employment in the manufacturing sector. That means an increase in technological innovation by 1 point will decrease employment in the manufacturing sector in South Africa by 0.52 points. Furthermore, the results reveals that there is relationship among control variables under the study. Based on the findings, the study therefore recommends that the government and policy makers formulate and adjust economic development policies that will produce the needed economic growth to secure employment in the midst of technological advancements in the manufacturing sector, through SETAs, TVETs and other Higher education institutions by interacting with the industry to develop curriculum and offer qualifications that enhance skills complementary to technological use, such as robotics, servicing of technology, software engineering, big data analytics and so forth.Thesis (MCom) -- Faculty of Business and Economic Sciences, 202

The effect of technological innovation on employment: the case of manufacturing sector in South Africa

The role of technological innovation in the growth of an economy and the production of goods and services motivated this research. Technology is expected to boost production and relieve workers of the stress of doing repetitive tasks. It can also have a long-term impact on economic activity by increasing manufacturing efficiency and lowering production costs, which can be translated into lower prices for the goods and services demanded. The main objective of the study is to examine the relationship between technological innovation and employment, using a case study of the manufacturing sector in South Africa, making use of the Tobit regression model estimation technique. Annual secondary time series data spanning the period of 1970 to 2019 was employed. Earlier studies conducted in South Africa measured the relationship between employment in the manufacturing sector and technological innovation using different methodologies, including estimating procedures, model specifications and time frames. In this study the Tobit model estimation technique is utilised. The Tobit model results showed that there is a negative and significant relationship between variables used as proxies for technological innovation and employment in the manufacturing sector. That means an increase in technological innovation by 1 point will decrease employment in the manufacturing sector in South Africa by 0.52 points. Furthermore, the results reveals that there is relationship among control variables under the study. Based on the findings, the study therefore recommends that the government and policy makers formulate and adjust economic development policies that will produce the needed economic growth to secure employment in the midst of technological advancements in the manufacturing sector, through SETAs, TVETs and other Higher education institutions by interacting with the industry to develop curriculum and offer qualifications that enhance skills complementary to technological use, such as robotics, servicing of technology, software engineering, big data analytics and so forth.Thesis (MCom) -- Faculty of Business and Economic Sciences, 202

Spare Parts Management of Aging Capital Products

Spare parts are critical for operations of capital products such as aircraft, refineries, trucks, etc/, which require maintenance regularly. Original Equipment Manufacturers (OEMs) bear the responsibility of undisrupted maintenance service and spare parts flow for their capital products. Due to various factors OEMs lose their spare parts suppliers occasionally and these losses threaten the reliability of their maintenance service and capital products. In this thesis, we consider supply risk in management of spare parts inventory. The thesis consists of two parts: First we develop advance indicators for future supply problems of spare parts and suggest a model utilizing those indicators for inventory control of spare parts. Our results indicate that OEMs can save significantly by utilizing those indicators together with our model in their daily business. Second, we consider secondary markets and their effects on spare parts supply chains of OEMs. Secondary markets are chap supply sources for spare parts needs of OEMs. Therefore effective usage of them yield significant cost savings and boost service rate of OEMs. Furthermore, secondary markets are sources of competition since low prices on those markets attract some customers of OEMs. These two factors are considered from the perspective of spare parts inventory control. In the second part, we conclude that for OEMs it is beneficial to use secondary markets as a supply source as long as they adjust their selling prices accordingly